New to Real Estate · Denver, CO · Member since 2020 · 4 posts · 1 vote
Hello BiggerPockets!
I'm currently developing a presentation to get financial assistance from a long time friend (basically family). This friend and I have always talked about starting a business together and my recent fervor for real estate investing as sparked the opportunity to make our dreams a reality. My passion for hitting the books and doing the dirty work is what I bring to the table and my potential partner has the ability to bring the capital.
I'd like to come to our first meeting with some examples of contracts, documents, etc. that will help them feel more secure in how potentially their money will be invested and how much their return could be and when they could get it?
How do others typically start partnerships? Is there a place I can find some example terms of a private lending transaction to base ours off of? What if it just isn't just a lending situation but also a partner in other aspects of the business other than the financials?
Thanks in advance to the community for your support!
For lending, you are looking for a promissory note and lien (deed of trust or mortgage, depending on your state).
For "partnering", it is a partnership agreement. Partnerships are about the least desired structure. If they are completely passive and no say on major decisions, you might be facing an SEC security.
You really should talk to a lawyer in your state. Lending is probably the safer of the two options. Do all the things you would have to do under a HML and close at a title company.
For lending, you are looking for a promissory note and lien (deed of trust or mortgage, depending on your state).
For "partnering", it is a partnership agreement. Partnerships are about the least desired structure. If they are completely passive and no say on major decisions, you might be facing an SEC security.
You really should talk to a lawyer in your state. Lending is probably the safer of the two options. Do all the things you would have to do under a HML and close at a title company.
@Sequoia Austin You can use your friend as a private lender. By doing that you need have a Mortgage and Promissory Note to outline the terms, such as interest rate. You can also partner with your friend. Then you need to have JV agreement with your friend to outline each responsibility and how to share the profits (or loss). Each way has its own pros and cons. Thanks.
I would highly recommend having them invest with you and Pay them a higher rate to barrow the money rather then partnering up. I have done both. For example... I bought 8 homes in 3 months with very little cash. Then I had to raise money to fix them up.
The more I needed the money the higher the rate I paid. The highest I would pay is 20%. For me it came out to be about 25% of the profit is what I paid out and my investers were happy with not taking any risk as they were guaranteed the interest.